How to Buy an Income Property

Rental investors buy property to provide steady income, but some investors have trouble setting aside personal tastes to focus on properties attractive to renters. Knowing what renters want helps investors focus on properties with such features. Income property buyers spend the majority of their time researching the market and evaluating the potential rents and property maintenance costs to ensure a profit.

1

Calculate the funds you have to invest by evaluating your liquid assets or assets available to convert into cash.

2

Scan newspapers and rental property websites to gauge an area's investment potential. Determine the most attractive price range for renters in your target geographic area by researching rental prices over at least a year. Contact a real estate agent if you wish to have a knowledgeable professional pull the information quickly.

3

Determine the amount of time you want to spend managing your income property. As an alternative, check the availability of a competent local property management firm to supervise your investment. Talk with the management firm to determine the fees for property supervision.

4

Meet with several lenders to determine your creditworthiness for an income property loan. Apply for a loan to purchase the income property and submit the supporting documentation required by your lender such as bank statements and tax returns.

5

Talk with a qualified real estate investment agent about the types of property available in your price range and target area. Apartment, condominiums, multiplexes and single-family rental houses have advantages and disadvantages for owners.

6

Compile a list of the available investment properties. Note the square footage for each property, availability of garages or carports, as well as any patios, porches and complex amenities, such as a swimming pool or communal washers and dryers.

7

Research properties by looking at the current and past rents, vacancy factor, grounds maintenance and monthly servicing, utility costs, property taxes and school district taxes. Note also any special tax assessments and property age and condition. Consider the costs and benefits of the house or complex amenities.

8

Visit the properties to evaluate the condition. Bring a professional property inspector to examine the structure's interior and exterior. Match the property features with the city and county building permits for the property. Lenders typically deny loan applications for rental units without proper permits or zoning variances.

9

Narrow your selection down to one property and submit an offer with the help of your real estate agent or attorney. Include a home inspection contingency to confirm the property's condition. Your agent or attorney submits the contract to the seller and then to the title and escrow agent upon ratification.

10

Close escrow once you gain loan approval and all contingencies are satisfied. Notify current tenants of the ownership change by sending them a certified letter identifying yourself as the new landlord. Let them know where to send rent payments .

About the Author

Lee Grayson has worked as a freelance writer since 2000. Her articles have appeared in publications for Oxford and Harvard University presses and research publishers, including Facts On File and ABC-CLIO. Grayson holds certificates from the University of California campuses at Irvine and San Diego.